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Welcome back everyone. Now you to Credits chief executive wants to decide by.
The end of the year this year whether to make.
A takeover offer for Commerce Bank, pending the new German government's willingness to allow the deal. Now this comes as the Italian lender reported record profits for the fourth quarter. Well, Andre el Child, the chief executive of UniCredit, now joins us and as always, thank you so much for giving us a little bit of your very busy schedule.
Now, you had some very good earnings.
When you look at the levers of what rates are doing and the I guess underlying nervousness in the global economy, what do you have to pull on to make sure that you're on target.
Well, friend Sine, I would say that we have waited for this moment for the last four years. We crown sixteen quarters of profitable girls, are well prepared and we've laid the foundation for the next twelve And if you look at our messaging, not only did we reach record results of nine point seven billion, but we absorbed more than one point three billion on extrang recharges and reinforced fervor.
Our provisions and our and kept impact our overlays. So for us, this was the start of the next twelve quarters were twelve year the twelve quarters where we would be more focused on gross and we would be in a position to upset the normalization of rates. So we
said that this moment was going to come. As we are today, I think we have one of the very few banks that we'll be able to keep cost flat in the next three years, that will be able to keep cost of risk flat in the next three years, and that has built factories to such an extent that our fee income will be able to upset initially most increasingly more than proportionally the compression of NII coming from race.
So whatever happens, that will be under control. And then you have all the M and A that you're possibly looking at.
Well, you can never see whatever happens, but I think we're very, very confident on what we're going to deliver. I think this year is not only for US a record in terms of net profit, profitability and distribution at nine billion, it's also the start of an xt three years where we want to first match and then increasingly beat that.
Andre talk to me a little bit about generally I mean there was a bit of a surprise that you're above five percent. Can you break down the numbers in terms of what you have for credit and what you're holding on behalf of clients.
Well, let's say that the investment in generally is for us, as I have said, completely financials. We have no intention to buy or move strategically on generally. They have been a partners of ours for a long time. We distribute products in a number of markets. We might be distributing some of their asset management and it was the right thing to do when we built it up. It was leaked. When it was leaked, we said that our client had about point six percent. We were at about four point seven.
Now we are just over five. Honestly, I don't think it's very significant.
I mean, there's quite a lot of people in Italy that's saying it also gives you leverage to negotiate with the government or the parties into what you're trying to do.
But with Banko BPM, is there any truth.
In that that it's a good investment but also you know it gives you an advantage.
Look, it's a good investment and we obviously by having mistakes we're a party to talk to. I wouldn't go as far as putting it as leverage or looking at a theory of the coordinated approach on BPM.
So it's nothing more than actually, you know, you find it a good investment over timing.
It is a good investment that has returned well. We built it over several months and we're sitting on a good capital gain, which is partially a hedge. So for us, it's a good thing for the bank.
Andrew talk to me also about commerce banks. We had a lengthy conversation also and Davos. It seems that German officials are doubling down on not wanting to sell you the bank. Frankly, even if there's a change of government come February twenty third, do you see the tone changing at all.
Well, I don't know. From our standpoint. We were invited. We did what we said we would do. Because as we were invited and we crossed to the to nine percent, we said we would reach twenty nine. We reached twenty nine. We said we would ask for authorization from a regulator.
We asked for that authorization. We also said when the tone changed that we would wait and not launch a transaction until we had the opportunity to sit down, go through the details and explain the benefit that this transaction has not only for the two banks and their city holders, but also for the sector Germany German industry in Europe.
So we're optimistic than when the emotions are off the table and we can focus on what this really is and what it brings, we're going to be successful in having support.
And I know you said that you only decide, I guess in a year if you got hostile and that or not.
Is this something that's all?
It's just that if you look at the timeline of elections, of forming a government, of having discussions on everything else, you're looking at three to four quarters minimum. And therefore that allows us as an investor to have an influence on Commerce Bank, see what the performance really is going to be and then take a decision when we have all the elements.
We're also understand that Commerce Bank is changing their strategy or adjusting their strategy this week. Maybe also to fend off a possible bit for you, what would you do differently if you're in charge of Commerce Bank?
Well, look, I think we'll see tomorrow, but we all would be surprised if the plan was not optimistic. It always is when someone tries to fend off attention that they we are not pleased about. I think for me, the important is does the plan strengthen the bank? It's
overly people overly focus on cost reduction. I think does it strengths to the bank, which means you search for efficiency, targeting your cost reduction in the areas that do not add value, that are duplicative, that are overhead, etc. But you then use a lot of that money, in our case more than to third reinvesting the bank in technology, in data, in the network, in the factories, in strengthening
the overall bank, and in the people. I think for us, seeing plans that go into this direction, which we feel is our blueprint, gives us comfort. Seeing plans that just
put up reduction doesn't. More importantly, specifically with respect to Commerence Bank, I would say that there is concern on the state of their technology, the obsolescence, the fragmentation, whether or not they have ever integrated the two systems of Commerceman and Dresna from the acquisition, whether they'rey investing enough to modernize as opposed to just run and their corporate center. Their corporate center has almost forty five percent of their assets.
There is very little information on what those acsets are, their duration, their risk, the rates of a fixed rate and not fixed straight and most importantly how that is important to running the core business because I do think that nowadays banks have moved away from having a large corporate center with large assets that really don't have a day to day impact on running the business and move on realizing results on running the business day of today.
Andrew talk to me also about a little bit about BACOBPM, So how close are you to getting more well?
Look, I think they are announcing their plan today, or they have announced their plan today. I haven't had time to go through it. My expectation is it's again going to be quite optimist. I think the question in all of its plans is number one, you can put a good plan on the board and let's see if that is the case. The second question is are you going
to be capable of executing it? And coming from sixty quarter of RUSSOM execution at unique credit, I do think execution is difficult, particularly now with the environment going against you. So in the case of BPM, I guess if we're successful, we'll never know. If we're not successful, we will in the case of Commerce Bank, we will have three to four quarter to observe whether what they put on the board is actually happening or not. That's what I can
say for US. BPM is clear. I think you know how many years it has been rumored because it's very complementary to unique credit. There are almost no overlaps into a network, there are no overlaps in the clients. We don't see any issue of concentration and as actually we can provide more support and that's where the value is.
So regulatory approval should not be a problem, you believe.
Well, you never say that, but I would say that if you look at the numbers in terms of antitrust, in terms of a number of these items, we were very far away from having significant issues. So we are quite optimistic about that with respect to regulatory approval. We're two strong banks, so that should come as well.
Do you think Credit agriucl is behind you?
I mean thinks. I think, like in any transaction, you need to convince the shareholders of the target to be with you. We think we have had a good shot at convincing Commerce Bank shareholders look at where the shop price is today, and I think on BPM shareholders, we need to do our work and show the value that we would bring, the differential value that we would bring, and why switching from BPM stock in two hours can
bring them even more value. I'm quite confident. We've had a long dated partnership with Creatical in custody in a said management in other areas. They know us, so I'm quite confident eventually they will they will be positive to a transaction. But it's up to them to decide.
Are there active talks at the moment with Creative At.
The moment we are not, And we need to be quite careful with any interaction because we need to treat all shareholders the same and petti passu and therefore that's why with the offering flight, we're quite careful.
Do you think the government will green light the deal in general? Have you had more conversations with the government.
Well, I do think that if you go back and you look at all the statements that have been made, I think they can be summarized that the government is observing with attention, because there are some things that clearly any government looks for, but at the same time, they have been quite clear that they're letting the market function, and if that is the case, I think they're doing what we're supposed to do, and we'll do what we are supposed to do.
Andre, are you pretty confident that UniCredit will be a bigger group in twelve months from now?
Yes, I was done by yes to your question, it doubles, but I do think that one way or the other, the differential value that we will deliver through our main plan is going to further differentiate us from the competition. That should give us the credibility of the currency to be able to grow through acquisition in the next in the near future.
Andrea, thanks so much for joining us.
Was Andrea Orchild, the chief executive officer of UniCredit,